It’s never too early to start planning

If you are still many years from retirement, chances are that planning for it is relatively low on your list of priorities. But as time passes, planning for retirement can quickly become your most important goal, and the foundation that you lay today will pay off in the future.

Time is your most valuable advocate when you start your retirement planning early. Benefits of planning early include:

We can help you remain focused on your long-term plans, make sense of financial market developments and determine how to respond to those changes. Planning and focus are vital to realizing your retirement objectives.

Understanding risk

Depending on your age, current financial situation, goals and needs, there are risks you should consider. For example, you may allocate some portion of your retirement portfolio to growth-oriented investments. The reason: if you don’t take on market risk you run another risk – your income not lasting throughout your retirement years.

We will work with you to identify the factors, or risks, most relevant to your situation and plan for them.

Here are a few factors that can have a negative impact on your retirement savings:

Securities are subject to market movements, but over the long term, stocks have outperformed many other assets. Past performance is not indicative of future results.

As you draw closer to retirement, some concerns may become more relevant such as retiring during a volatile period. We are here to help you navigate these choices and stay on track.

Note: Growth-oriented investments generally involve greater risks and may not be appropriate for every investor.

Laying the groundwork

The first step in putting together an effective retirement plan is to ensure you have the professional support you need to develop a sound strategy and to guide you through its implementation and management. This includes not only a financial advisor, but possibly a CPA, estate attorney, and insurance and trust professionals. You may also choose to include family members. We can help you manage these relationships so your “team” works together effectively.

Once you have a team in place, the real planning can begin.

Establish your priorities

• Clearly assess your retirement needs and objectives and identify your “needs” versus your “wants.” Some tradeoffs may be necessary.

• Once you are on track to meet your essential goals, we can broaden your plan to include other goals such as enhancing your lifestyle, donating money or helping a family member.

Assess your retirement needs – determine your number

• Your goals should be categorized as “needs” – enough income to live comfortably – and “wants” – a second home or extended travel.

• Taking your goals into account, determine the amount of money you will need to have saved by the time you retire.

• We can help you plan for unexpected expenses and build in a buffer.

Take control of your retirement plan

• We will help you focus on the factors that you can control, or at least influence. For example, if you are not on track to meet your savings goal, you can try closing the gap by contributing the maximum amount to your IRAs or 401(k)s.

• Assess your long-term care and life insurance options.

Allocating assets

• Identify the appropriate types of securities in the right balance for your situation.

• We can help you align your assets and holdings with your investment time horizon and the level of risk with which you’re comfortable.

• Your asset allocation will change as you continue to approach retirement.

Note: Asset allocation does not ensure a profit or protect against a loss.

Manage your plan

• Retiring comfortably doesn’t just happen. It requires care, insight and expertise.

• We can help you regularly review and reassess your retirement plan so it remains aligned with your situation, goals and aspirations.

Are You on Track?

Instead of simply assuming that you’ll be ready to retire when and how you had anticipated, we will work with you to answer some core questions:

• Have you identified your core needs including basics such as housing, food, transportation and medical care?

• Do you have a retirement plan? If so, are you regularly reassessing it to determine whether it remains aligned with your goals?

• Are the investments in your retirement plan diversified appropriately in terms of growth and income potential?

• If you are concerned that your plan could come up short, have you assessed other options that may be available to you? For example, you could:

  • Increase contributions to your IRAs and 401(k)s and

  • Determine if you should reallocate your assets.

• If you feel that you are on track for retirement, are there additional objectives that you might want to consider? For example:

  • Establishing education savings plans for family members and

  • Planning for your legacy.

Should You Roll Over Your Savings?

If you change employers – or go to work for yourself – you typically have several options for dealing with the funds you’ve accumulated in your former employer’s retirement plan such as a 401(k) or 403(b). The option you choose could have significant tax implications or alter your existing retirement plan. Before you take action, we’ll review with you the advantages and disadvantages of each and help you determine an appropriate course of action for your retirement plan.

• Leave the money in the former employer’s retirement plan, if allowed.

• Roll over all your funds into your new employer’s plan right away if the new plan will allow you to do so.

• Roll over all your retirement assets temporarily into an IRA until your new employer’s plan will accept the funds.

• Roll over all your retirement plan money directly into a traditional IRA if you would like more flexibility and control in your investment options.

• Take as cash in a lump-sum distribution, understanding that you will incur a penalty if under age 59½ and that the amount will no longer be tax-deferred and will be subject to a 20% withholding rate.

• Roll over all your retirement plan money directly into a Roth IRA if you determine the benefits of allowing the funds to grow tax-free outweigh the taxes you will incur.

Don’t forget to review your records to ensure that you have not left any retirement assets behind at previous employers.

Time Is on Your Side

If you’re in your 20s or 30s, retirement may seem too distant to think much about. However, basic retirement planning today can significantly simplify your life down the road – particularly given the possibility that Social Security will not continue to provide the safety net it does today.

With time on your side, you have a number of advantages over older workers. You have a large array of savings and investment options available – including aggressive investments – and you can take more risk than an investor closer to retirement. We can help you build a plan that should not interfere with your short-term goals, but that may potentially make a significant difference to your future.

As we create this plan, there are two particularly important topics for you to understand at this stage in your life: compounding interest and employer-sponsored savings plans/individual retirement arrangements (IRAs).

• Compounding Interest – Compounding interest allows you to earn interest on both the principal invested and the interest earned – enabling you to possibly turn a small sum into a substantial one over time.

  For example, an individual who consistently contributes $200 a month at the age of 25 into a tax-deferred retirement account for 40 years will contribute a total of $98,400. Assuming a 7% monthly compounding rate, that account will grow to a total of $565,391 by the time the investor reaches age 65.^*

• Employer-sponsored plans and IRAs – Plans such as 401(k)s and 403(b)s are a great way to kick off your retirement program. In some cases employers will match all or part of your contributions to these plans. There are also several types of IRAs you can take advantage of, some of which allow you to defer taxes until you withdraw assets from them, and some provide tax-free withdrawals. We can help you determine the IRA best suited for your circumstances, and the assets you should place in them.

If you start saving for retirement in your 20s and 30s, you should be in good shape by the time you retire. However, regularly revisiting your plan’s performance and your evolving circumstances, as well as your goals and aspirations, is vital. We can help you put all those puzzle pieces together and develop a plan for a secure retirement, designed to meet your specific needs and goals.

^*This hypothetical example is for illustrative purposes only and is not intended to imply or represent a specific return on any particular investment.

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As retirement approaches, is your retirement plan ready for you?

If you are one of the many Americans who planned to retire in the next five to 10 years but are not sure if you can afford to stop working, it’s time to determine just what shape your portfolio is in – and what actions we can take together as you strive to generate the income you’ll need throughout your retirement years.

That process begins by taking the following steps:

• Assessing your full financial situation,

• Taking stock of all your assets and liabilities, and

• Determining how the sources of income you've earmarked for retirement stack up against your anticipated expenses.

Embarking on a new beginning

Today many individuals view retirement as an opportunity to reshape their lives, begin new careers, adopt new interests and take advantage of additional freedom and time. While many may work because they need to, a significant number work because they want to.

Regardless of whether you work in retirement or not, your portfolio will need to keep pace with inflation for you to sustain your lifestyle through the first phases of retirement, while accommodating the additional income you may need later in life.

You should be prepared for healthcare costs and living expenses to increase, perhaps dramatically, as you age. We can help structure your retirement plan so that you may be able to afford not only the routine costs of healthcare, but expenses related to illness, disability and long-term care.

The Retirement Income calculator on this website can help you estimate the income you’ll need. Of course, accurately determining your income needs and the assets you’ll require to generate that level of income will take additional time, thought and effort – because the unique variables affecting your situation are more complex than an online calculator can reflect. We can help you with a deeper level of analysis.

Your retirement portfolio needs to be robust and comprehensive enough to accommodate your changing objectives and requirements. We can help you understand just how close you are to meeting your retirement needs and achieving your goals.

How much investment income will your portfolio generate?

Although many individuals nearing retirement have at least one 401(k), IRA or defined benefit plan, rarely are these investment portfolios sufficient to meet the full range of retirement needs and goals.

Fact: Only 13% of workers are “very confident” that they will have the money they need to retire.

Source: 2009 Employee Benefit Research Institute

For you to have the income you need throughout your retirement, as a general rule, you should not withdraw more than 4% per year from your retirement portfolio.

For example, if you have a total of $500,000 in retirement assets, you should take no more than $20,000 per year in income.

However, depending on your specific circumstances, you may need to withdraw less – or you may be able to spend more. The key to taking control of your retirement is gaining a full understanding of your financial situation and developing a comprehensive plan to offset any gaps you identify.

Take control of your retirement

Ask yourself the following question: Do I have a comprehensive retirement plan?

If you do not have a comprehensive plan for growing your assets and protecting your future income, don’t wait any longer. Accurately determining the income your investments can generate and building in a safety buffer to protect your retirement under difficult conditions takes considerable work and time.

If you do have a retirement plan in place, ask yourself these additional questions:

• Has it been a while since I last reassessed my plan?

• Since the last time I reassessed my plan, have my financial circumstances, personal situation or retirement goals changed?

• Has market turbulence adversely affected my portfolio?

If you answered yes to any of those questions, it’s time to thoroughly reevaluate your retirement plan.

As we evaluate your retirement plan, we will look at factors such as:

• How much you are saving,

• How much you are spending and what you will need to spend, and

• The rate at which you’ll be able to spend in retirement.

Then we can help you make appropriate adjustments like:

• Paring discretionary spending,

• Reallocating your investment assets and

• Considering ways to “downsize” if necessary.

All of this planning and adjusting can help put you on the path to a potentially comfortable retirement.

Should you continue to work?

A recent AARP study found that many individuals aged 50 and older obtain a great deal of satisfaction by continuing to work – not to mention additional income. Increasingly, many people view this period of their lives as an opportunity to embark on new career paths, helping them to remain active and mentally engaged while adding to their retirement portfolios.

True, such workers often take pay cuts and forgo pensions and healthcare benefits, according to a long-term study recently released by the AARP. But many view these disadvantages to be offset by the reduced stress and greater flexibility their new jobs permit. In fact, 91.3% of those surveyed said they enjoyed their work, a significant increase from the 79% who said they liked their work in their old jobs.

“Many older workers are ready to give up the long-time grind and look for stimulating jobs with flexible schedules as they begin the process toward retirement,” explained Susan Reinhard, senior vice president of the AARP Public Policy Institute. “The study shows dramatically that workers are putting a premium on reduced stress as they downshift a bit.”

Those who became self-employed in their new jobs are included in the study. And the number who did so skyrocketed, based on the same study: 23.6% were self-employed in their new jobs, as opposed to only 11.5% in their old jobs.

Can You Afford to Leave The Legacy You Want?

Depending on your financial situation, you may be confident that you can fund a comfortable retirement and still have money left over to leave an inheritance for family members or to provide a hefty donation to a favorite charity or two.

Or, you may not. Particularly if your retirement portfolio has been affected by recent market volatility or if you’ve had unanticipated expenses, some tradeoffs may be necessary such as settling for a more modest retirement lifestyle, postponing your retirement or making other changes to achieve your legacy goals.

We can assist you with your estate and legacy planning including helping you to optimize your assets, potentially minimize tax implications and determine the course most appropriate to your situation. In addition, we can help you select effective vehicles to implement your plans.

Only after you are satisfied that your retirement plan will provide you a comfortable retirement should you think about the legacy you would like to leave.

Dealing with Rising Healthcare Costs

One of the most significant risks to ensuring an adequate income stream throughout your lifetime is the rising cost of healthcare.

In addition to both one-time and routine costs, long-term care can take a considerable toll.

Conventional medical insurance, including Medicare, leaves uncovered many of the expenses related to nursing home and in-home health costs. Long-term care insurance fills in many of those gaps. However, if you do not already have a policy in place, you may need to consider whether the benefits outweigh the costs of such coverage – which rise with age.

If available, the right policy may be well worth the cost. This increasingly popular form of private insurance can help protect your assets, minimize your dependence on family members, and enable you to determine how and where you receive long-term care services. The extent and scope of coverage can vary based on policy. For example, benefit periods can range from two years to decades, and some policies:

• Pay only for nursing home care,

• Cover only home care or

• Pay for both.

We can help you determine whether long-term care insurance is appropriate for you, assist in identifying the policy that best suits your needs and work with you to explore other options.

When to Take Social Security

For many individuals approaching retirement, deciding when to begin taking Social Security benefits is a crucial decision – particularly given that a significant portion of the average retiree’s income in the United States comes from Social Security.

More than two-thirds of eligible Americans take their benefits early – after they reach 62 but before they reach full retirement age – often because they simply don’t have a choice: they need the money.

How long can you afford to wait before taking Social Security benefits?

As you decide when to take Social Security benefits, consider your options:

A variety of factors could also affect the timing of your decision to start tapping into your Social Security benefits – which is why it’s essential to explore all possible implications before deciding when to start. Primary factors include:

• Other sources of income – When choosing if you should take Social Security benefits early and leave other retirement accounts intact, you need to consider if you think you’ll receive a higher rate of return on your tax-deferred retirement plan than you would get from deferring Social Security benefits.

• Your spouse – If you both have earnings from your work, you probably will both receive a monthly benefit. The lower-earning spouse is often eligible for a spousal benefit up to one-half of the higher-earning spouse’s benefit. You also should consider the age and health of both you and your spouse when deciding whose benefits to tap first.

We can provide the information and insight you need to help determine the most appropriate course for you. Investors should also consult with a tax advisor to determine the tax implications.

Planning Your Exit Strategy

If you’re a small business owner and haven’t already determined your exit strategy, don’t wait any longer.

Very likely much of your net worth is tied up in your company. Positioning yourself to reap the benefits of the work, time and effort you’ve put into your business requires time, thought and skill. Among many other decisions, you’ll need to determine the most appropriate structure for divesting your business. You could:

• Sell it to a competitor,

• Sell it to one or more key employees or

• Keep it in the family.

You also have to consider the form in which you’ll receive payment including:

• Lump sum payments,

• Periodic cash payments,

• Combination of stock and cash, or

• Satisfaction of knowing the business will stay in the family, being run by someone who is willing and able.

We can help you structure the solution that’s most appropriate for your situation as well as advise you on how to invest the proceeds.

You may no longer be working – but your investment portfolio should be

Now that you’re retired, managing your money is more important than ever. As with any other stage in your life, factors such as your retirement goals and the economic environment may change, requiring you to make adjustments to your portfolio.

We can work with you to regularly review and reassess your portfolio and help give you confidence that your portfolio is appropriately balanced between growth-oriented investments and income-focused assets.

In addition to an ongoing review of needs, goals and investment performance, we can help you understand how routine decisions can have a significant impact on the effectiveness of your long-term plans. For example, consolidating cash accounts – including savings accounts, money market funds and checking accounts – can make it easier to monitor your savings and spending and take advantage of lower fees and higher interest rates.

Note: Growth-oriented investments generally involve greater risks and may not be appropriate for every investor.

How much income do you need?

Withdrawing income in retirement is often more complex than just determining the amount you need. An effective plan should consider which accounts to draw from first and whether to spend or, particularly in the case of mandatory withdrawals, to reinvest the funds.

To have the income you need throughout your retirement, as a general rule, you should not withdraw more than 4% per year from your retirement portfolio.

For example, if you have a total of $500,000 in retirement assets, you should take no more than $20,000 per year in income.

If you are concerned that you have not achieved the financial security you seek, that your investments are not generating sufficient income, or if you are uncertain when and how to withdraw that income, now is the time to work with us to get your financial future on track. We can help you to review and reassess your:

• Current financial situation,

• Core goals and key objectives,

• Available options for generating income, and

• Allocation of retirement and other assets.

Coping with the unexpected

Unfortunately, no one could have anticipated the dramatic declines in the financial and real estate markets that have taken a large chunk out of investors’ retirement assets. Even the most conservatively managed portfolios have suffered. So if you are at all concerned that your retirement plan needs some first aid, don’t delay treatment.

While there are no magic fixes, a number of effective strategies do exist for potentially minimizing losses, generating additional income and planning for growth including:

• Planning for long-term care needs not covered by Medicare or other insurance,

• Paring your spending and rethinking non-essential goals,

• Allocating a portion – or a greater portion – of your portfolio to undervalued, growth-oriented investments,

• Protecting income with financial products such as annuities,

• Safeguarding income against rising inflation with investment options that adjust to changes in the inflation rate, such as Treasury Inflation-Protected Securities (TIPS), and

• Returning to work on either a full-time or part-time basis.

Note: Growth-oriented investments generally involve greater risks and may not be appropriate for every investor.

From where should your income come?

If you’re like many retired individuals, in addition to Social Security benefits, you probably have at least one IRA, 401(k) or pension plan that you’re counting on to help finance your retirement years. You may also have other assets, ranging from savings accounts to the equity in your home, from municipal bond holdings to taxable investment accounts.

Having a strategy for withdrawing your retirement assets is important, but you should fully understand the tax implications before taking action. Below are some common retirement investments and key considerations for withdrawing money.

Be certain you understand the intricacies of your situation, including tax implications, before you take any steps that may be irrevocable. We can help guide you through these decisions.

If your income cannot keep up with your living expenses, you need to consider other options. That may require a relatively easy change – such as cutting back on your travel budget or delaying the purchase of a new car – to potentially much tougher decisions, such as returning to work either full- or part-time, selling your home, and moving to a less-expensive location. We understand the difficult choices you may face and are here to help you along the way.

^*Investors should consult with a tax advisor to determine the tax implications of the withdrawal strategies.

Dealing with Rising Healthcare Costs

One of the most significant risks to ensuring an adequate income stream throughout your lifetime is the rising cost of healthcare.

In addition to both one-time and routine costs, long-term care can take a considerable toll.

Conventional medical insurance, including Medicare, leaves uncovered many of the expenses related to nursing home and in-home health costs. Long-term care insurance fills in many of those gaps. However, if you do not already have a policy in place, you may need to consider whether the benefits outweigh the costs of such coverage – which rise with age.

If available, the right policy may be well worth the costs. This increasingly popular form of private insurance can help protect your assets, minimize your dependence on family members, and enable you to determine how and where you receive long-term care services. The extent and scope of coverage can vary based on policy. For example, benefit periods can range from two years to decades, and some policies:

• Pay only for nursing home care,

• Cover only home care or

• Pay for both.

We can help you determine whether long-term care insurance is appropriate for you, assist in identifying the policy that best suits your needs and work with you to explore other options.

Can You Afford to Leave the Legacy You Want?

Depending on your financial situation, you may be confident that you can fund a comfortable retirement, leave an inheritance for family members and provide a hefty donation to a favorite charity or two.

We can assist you with your estate and legacy planning including helping you to optimize your assets, potentially minimize tax implications and determine the course most appropriate to your situation. In addition, we can help you select vehicles – from special-needs trusts to donor-advised charitable funds – to implement your plans.

Only after you are satisfied that your retirement plan is both comprehensive and flexible should you think about the legacy you would like to leave.

Social Security and Working during Retirement

Although you’re entitled to take early Social Security benefits beginning at age 62, tapping into your benefits before you reach full retirement age reduces your benefits. In general, if you wait until age 70 to take benefits, you’ll receive on average 6% to 8% more per month than if you’d taken the benefits sooner. The decision on when to start taking Social Security benefits should really depend on your income needs and how healthy you are.

In addition, working during your retirement years may affect your Social Security payments; it all depends on your timing. The good news is once you are beyond full retirement age, your Social Security benefits will lock in and won’t be affected regardless of how much you earn.

For example, if you start taking benefits before your full retirement age and continue to work, you may see the following effects on your benefits:

• Monthly payments may be reduced and

• Benefits will be cut by $1 for every $2 you earn above $14,160 per year.

Your birth date determines the age at which you become eligible for full Social Security benefits.

Note: Individuals born on January 1 of any year should refer to the full retirement age for the previous year.
Source: Social Security Administration

We can help guide you through the different scenarios so that you can choose which one is most appropriate for you. Investors should also consult with a tax advisor to determine the tax implications.